Investing When You're Not Bullish on the Bull Market

Monday

There's a saying on Wall Street: 'Bull markets don't die of old age.' But with the clock ticking on this current bull market in U.S. stocks " the second-longest period

There's a saying on Wall Street: 'Bull markets don't die of old age.'

But with the clock ticking on this current bull market in U.S. stocks " the second-longest period of persistently rising stock prices since 1928 " some investors worry the end will come sooner than later. And what good times they've been: Since March 2009, the S&P 500 has more than quadrupled.

It's anyone's guess when the good times will end " or what the culprit will be " though the latest concerns include trade spats and fears that the economy is slowing.

Successfully timing the market " selling near its peak and buying again near its trough " is incredibly difficult to do, even for professionals. Succumbing to the temptation to try could cost you, both in taxes on sales and lost gains while you sit out.

While it's painful to ride out hard times or invest when stock prices are near record high levels, take heart knowing that the stock market's long-term average return is 10% annually for buy-and-hold investors. If you want to do something, consider tweaks to your investment strategy " buying alternative assets, foreign stocks or different kinds of assets within the U.S. market (read more on that below).

Stay in the market

If you thinks stocks are overpriced or worry the bull market's about to end, you may be tempted to stop investing.

'You don't want to be out of the market entirely, but if you don't like the pricing of stocks right now, there's nothing wrong with holding cash until you do,' says Brad McMillan, chief investment officer at Commonwealth Financial Network, a registered investment adviser. 'Cash buys you some sleep at night, it buys you some optionality. But don't go and bury it in the backyard.'

Open a money market account that pays an attractive rate (several banks currently offer 1.75% APY or higher) and invest in the market over time, McMillan says. This strategy, known as dollar-cost averaging, helps smooth out your purchase price so you don't invest all of your money at the market's peak.

Diversify, diversify, diversify

A well-diversified portfolio should include a mix of different assets (including stocks and bonds), and diversification can be especially comforting when the stock market's on shaky ground.

If stock prices drop and stay down, expect slower economic growth, lower earnings and the Federal Reserve to lower interest rates. All that runs counter to what's happening currently. Central bankers are expected to raise rates two more times this year.

Even if you don't foresee a full-fledged bear market on the horizon, McMillan says to consider these three strategies:

Add more bonds

Bonds are appealing because they can help balance potential losses from stock investments. For example, in the past 10 years, two of BlackRock's biggest exchange-traded funds " one tracking the S&P 500 and the other tracking the total U.S. bond market " have been negatively correlated, meaning they've moved in opposite directions.

Buy dividend-paying stocks

When stock prices aren't skyrocketing higher anymore, then dividends will generate more of your total return. Utility companies and real estate investment trusts (REITs) historically pay high dividends and have steady sources of revenue, even during economic slowdowns.

Buy non-cyclical companies

Similarly, the consumer-staples sector " companies that make food or household products, for example " has a more reliable source of revenue. Consumers will cut back on clothing purchases before they'll stop buying groceries.

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